Glossary: Business Judgment Rule

Business Judgment Rule

Business Judgment Rule - The Business Judgment Rule is a defense to liability for a breach of a director's or officer's management obligations to the corporation. Pursuant to the Business Judgment Rule, provided the director or officer acted in good faith in a matter of business policy or business judgment, the director or officer will not be liable for errors of judgment that resulted in the allegedly negligent act or omission. In performing their management duties, directors and officers may rely on the opinions of accountants, legal counsel and other similar professionals. The business judgment rule is not available as a defense to an officer, director, or controlling shareholder with respect to a corporate transaction in which that officer, director, or controlling shareholder has a conflict of interest.

Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.

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